Academics sometimes describe a corporation as a “nexus of contracts”. An investment bank might better be defined as a “nexus of conflicts”. It intermediates between buyers and sellers of loans and securities. A tendency to favour regular counterparties is the industry’s original sin.
US authorities are reportedly investigating banks over practices in block trading. Here, companies or large investors typically employ them to sell large chunks of stock quickly and quietly. The scope for malpractice is obvious.
The Securities and Exchange Commission and Department of Justice are apparently examining whether intermediaries sometimes tip off favoured hedge funds about impending trades. Hedgies could then profit from price pressure when large lines of stock hit the market.